Analysis: Why the Govt. wants to go after Bitcoins

David Gomez, 15th June 2011

The US government and the Federal Reserve have complete and total control over the currency. They don’t want to lose this control.

And that makes Bitcoin an enemy of the establishment.

To sum it up shortly, Bitcoin is a form of digital currency that was created in 2009 to act as an alternative to the central banking systems used all over the world. A large part of the world’s population believes that central bankers have far too much control over the lives of people.

They have the power to print up money whenever they want, and they usually do this to help expand the size of the governments they work with. There is no limit to the authority a government has when their banker partners can inflate the currency supply to fund their grand schemes.

Bitcoin is the world’s first attempt to use technology to create a decentralized digital currency that cannot be tracked the way that traditional currency transactions are. In theory a decentralized currency like Bitcoin - that is free from the political control of the world’s central banks – could strip governments of their control over people’s lives.

Currencies that cannot be controlled fully by a government or central bank are a threat to the traditional systems of power that were established after the Federal Reserve Act in 1913. If you limit the amount of currency a government can create then you limit the power they possess. If there is a limited amount of money a government can spend, then they are forced to live within their means and make sensible financial choices.

This is the driving philosophy behind Bitcoins.

But unfortunately they don’t have much real world value. It is an admirable attempt to create a new system of crowd sourced currency, but you probably don’t want to keep any of your money in Bitcoins. The market for Bitcoins is nothing like the market for real currencies. There are very few reasons to ever use Bitcoins as a medium of exchange.

This hasn’t stopped the Bitcoin from catching the attention of US government authorities though.

Two U.S. senators have written an open letter to the United States attorney general, asking federal authorities to crack down on "Silk Road," the Internet black market drug trade. The digital currency that funds it is the Bitcoin.

Bitcoins haven’t been able to shift the monetary paradigm just yet, but they have been used to create a new kind of black market. Their best use is for scoring LSD off of an encrypted computer network. That’s enough for a few politicians to get involved.

Democratic Senators Charles Schumer of New York and Joe Manchin of West Virginia don’t want people using the Internet to get drugs from a secretive website. They also don’t like the idea that people can use a digital currency that hides who bought the drugs.

Here’s an excerpt from their letter to US Attorney General Eric Holder:

"The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins. After purchasing Bitcoins through an exchange, a user can create an account on Silk Road and start purchasing illegal drugs from individuals around the world and have them delivered to their homes within days. We urge you to take immediate action and shut down the Silk Road network."

The Silk Road Internet drug market and Bitcoin are probably very alarming to the US government. People are using them to regain individual freedom in two of the areas that the government controls most: economic freedom and what people can put into their bodies.

The two senators are suggesting that the attorney general go after Silk Road and Bitcoin not because they are dangerous to the public, but because they don’t want people to regain that control over their lives. The government has fooled people into thinking that they need harsh drug laws and The Fed’s fiat currency for their own good. Bitcoin has given people a way to circumvent the system and now the politicos are coming out to put a stop to it.

I don’t know if they will be able to put a stop to Silk Road and Bitcoin because the way they are designed to work will make shutting them down very tricky. That won’t stop the government from trying to snuff them out though. It should be very interesting to see how it plays out.

They’ll use the excuse that Bitcoin is bad because it’s some kind of currency that is only used to get drugs on Silk Road. In reality politicians and big government don’t like Bitcoin because it strips them and their central banker friends (who put them in office) of their enormous power over people’s lives.

Bitcoin isn’t viable yet, but it’s clearly the beginning of a new era in economics and currency. Even if Bitcoin is somehow shut down, that won’t stop people from attempting to create a digital currency that can’t be controlled like central bank currencies are. People don’t want to be controlled anymore by the global elite and this could be the beginning of a new system that will take hold in future decades. The idea of a digitally decentralized currency is one that is too good to go away. The government can try and get rid of Bitcoins if they want, but the idea of a decentralized currency is out there, and they can’t kill ideas.